South Africa holds “a special place” in Africa because it has a stock exchange with an $800billion market capitalisation, says Goldman Sachs International South African office and subSaharan Africa investment banking division head Colin Coleman.

He believes South Africa has “the only really functional capital market in Africa”.

Coleman says the second-largest stock exchange, in oildependent Nigeria, has seen its total market cap drop from $60billion to $40 billion.

“They trade $10million a day – we trade $2billion a day.”

An “illiquid Nigerian stock exchange” makes it very difficult for investors to “get out” in case of negative events.

“If you want to invest in Africa, and you want liquidity to get in and out, you invest in the Shoprites, you invest in the Standard Banks.”

Coleman regards South Africa as the “pathway into Africa”.

“It is structural. It is not really a question of whether you like South Africa or not. It is a question of what other structural options do you have to play Africa?”

Coleman questions, however, whether South Africa will be able to retain its stock of listed companies, as these companies continue to diversify in an effort to survive events and trends such as a weakening rand.

“South African corporates are diversifying at a [greater] and stronger rate than ever before, so the question for South Africa, from a policy point of view, is whether that is going to result in the effective domicile of these companies being undermined. Will South Africa keep its stock of companies in South Africa as they diversify? The regulators here are very aware of this problem.”

Coleman adds that he regarded the current scenario of a soft China and a strong US as “very, very toxic” for South Africa.

Looking at the broader continent again, he says Africa is faced with two themes: Africa rising or Africa uprising.

He says Africa is unfortunately not yet at the tipping point of “sliding into a very positive environment”.

Lessons from Africa
Whatever strategy works in South Africa is not necessarily one that will work in Africa, notes property developer Attacq CEO Morné Wilken.

He says his group has learned to take smaller steps in Africa than at home, and to seek out a local partner that understands the local markets.

Deloitte senior strategy director Rodger George highlights, for example, a South African retailer moving into East Africa, its shops lined with fridges full of frozen meat, as traditionally done in South Africa, while its customer base prefers buying its meat fresh at the market.

Nissan South Africa MD Mike Whitfield says it is important to take a longterm view of any investment in Africa.

“We are not in Nigeria for today or tomorrow, but for the next 10 . . . 15 years.”

Nissan partnered with the Stallion group to open a Nigerian vehicle assembly facility, in Lagos, in 2014.

Whitfield regards flexibility as another essential survival skill when doing business in Africa.

“Africa is unpredictable and things can change very quickly.”

Coleman, Whitfield, Wilken and George spoke at the Frontier Advisory Deloitte Africa Outlook conference, held in Johannesburg in January.